4. REVENUE FROM CONTRACTS WITH CUSTOMERS

a. Nature of goods and services

The following is a description of the contracts and customer classes from which Chugach generates revenue.

i. Energy Sales

Energy sales revenues are Chugach’s primary source of revenue, representing approximately 94.7% and 92.6% of total operating revenue during the six months ended June 30, 2018 and 2017, respectively. Energy sales revenues are recognized upon delivery of electricity, based on billing rates authorized by the RCA, which are applied to customers’ usage of electricity. Chugach’s rates are established, in part, on test period sales levels that reflect actual operating results. Chugach's tariffs include provisions for the recovery of gas costs according to gas supply contracts and costs associated with the BRU operations, as well as purchased power costs.

Expenses associated with electric services include fuel purchased from others and produced from Chugach’s interest in the BRU, both of which are used to generate electricity, as well as power purchased from others. Chugach is authorized by the RCA to recover fuel and purchased power costs through the fuel and purchased power adjustment process, which is adjusted quarterly to reflect increases and decreases of such costs. The amount of fuel and purchased power revenue recognized is equal to actual fuel and purchased power costs. We recognize differences between projected recoverable fuel and purchased power costs and amounts actually recovered through rates. The fuel cost under/over recovery on our Balance Sheet represents the net accumulation of any under- or over-collection of fuel and purchased power costs. Fuel cost under-recovery will appear as an asset on our Balance Sheet and will be collected from our members in subsequent periods. Conversely, fuel cost over-recovery will appear as a liability on our Balance Sheet and will be refunded to our members in subsequent periods.


Customer Class	Nature, timing of satisfaction of performance obligations, and significant payment terms
Retail	Retail energy customers can have up to four components of monthly billing included in revenue – energy, fuel and purchased power, demand and customer charge. The energy rate and fuel and purchased power surcharge are applied by kilowatt hour (kWh) usage. The demand charge is applied by kilowatt (kW). The customer charge is a monthly amount applied by meter.
Wholesale	Classified as firm energy sales. Four components of monthly billing are included in revenue – energy, fuel and purchased power, demand and customer charge. The energy rate and fuel and purchased power surcharge are applied by kWh usage. The demand charge is applied by kW. The customer charge is a monthly amount applied by meter.
Economy	Classified as non-firm energy sales. Three components of monthly billing are included in revenue – fuel, operations and maintenance, and margin. The actual fuel costs are billed per thousand cubic feet (Mcf) used. The operations and maintenance and margin rates are applied by megawatt hour (MWh) usage.

Payment on energy sales invoices to all customer classes above are due within 15 to 30 days.

Chugach calculates unbilled revenue, for residential and commercial customers, at the end of each month to ensure the recognition of a full month of revenue. Chugach accrued $7,749,823 and $7,887,991 of unbilled retail revenue at June 30, 2018 and 2017, respectively, which is included in accounts receivable on the Balance Sheet. Revenue derived from wholesale and economy customers is recorded from metered locations on a calendar month basis, so no estimation is required.

The collectability of our energy sales is very high with typically 0.10% written off as bad debt expense, adjusted annually.

There were no costs associated with obtaining any of these contracts, therefore no asset was recognized or recorded associated with obtaining any contract.

ii. Wheeling

Wheeling represented 4.1% and 3.5% of our revenue during the six months ended June 30, 2018 and 2017, respectively. Wheeling was recorded through the wheeling of energy across Chugach’s transmission lines at rates set by utility tariff and approved by the RCA. The rates are applied to MWh of energy wheeled. The collectability of wheeling is very high, with no adjustment required.

iii. Gas Sales

There were no gas sales during the six months ended June 30, 2018. Gas sales represented 2.9% of our revenue during the six months ended June 30, 2017, and were recorded through the transfer of natural gas and billed monthly, using Mcf as the unit of measure, and the RCA approved gas transfer price, revised annually. The collectability of gas sales was very high, with no adjustment required.

iv. Other Miscellaneous Services

Other miscellaneous services consist of various agreements including dispatch service and gas transfer agreements, pole rentals and microwave bandwidth. Revenue from these agreements is billed monthly and represented 1.2% and 1.0% of our total operating revenue during the six months ended June 30, 2018 and 2017, respectively. The revenue recognized from these agreements is recorded as the service is provided over a period of time. The collectability of these agreements is very high, with no adjustment required.

b. Disaggregation of Revenue

The table below details the revenue recognized by customer class and disaggregates base revenue from fuel and purchased power revenue recognized in the Consolidated Statement of Operations for the second quarter of 2018 and 2017 (in millions).



	Base Rate Sales Revenue							Fuel and Purchased Power Revenue							Total Revenue
		2018		2017		% Variance			2018		2017		% Variance			2018		2017		% Variance
Retail		$	27.9	$	28.3	(1.4	%)		$	14.0	$	17.0	(17.6	%)		$	41.9	$	45.3	(7.5	%)
Wholesale		$	0.5	$	0.5	0.0	%		$	0.8	$	0.9	(11.1	%)		$	1.3	$	1.4	(7.1	%)
Economy		$	0.0	$	0.1	(100.0	%)		$	0.0	$	0.4	(100.0	%)		$	0.0	$	0.5	(100.0	%)
Total Energy Sales		$	28.4	$	28.9	(1.7	%)		$	14.8	$	18.3	(19.1	%)		$	43.2	$	47.2	(8.5	%)
Wheeling		$	0.0	$	0.0	0.0	%		$	2.2	$	2.1	4.8	%		$	2.2	$	2.1	4.8	%
Gas Sales		$	0.0	$	0.0	0.0	%		$	0.0	$	1.7	(100.0	%)			0.0		1.7	(100.0	%)
Other		$	0.6	$	0.5	20.0	%		$	0.0	$	0.0	0.0	%		$	0.6	$	0.5	20.0	%
Total Miscellaneous		$	0.6	$	0.5	20.0	%		$	2.2	$	3.8	(42.1	%)		$	2.8	$	4.3	(34.9	%)
Total Revenue		$	29.0	$	29.4	(1.4	%)		$	17.0	$	22.1	(23.1	%)		$	46.0	$	51.5	(10.7	%)


	Base Rate Sales Revenue							Fuel and Purchased Power Revenue							Total Revenue
		2018		2017		% Variance			2018		2017		% Variance			2018		2017		% Variance
Retail		$	60.2	$	62.2	(3.2	%)		$	33.8	$	36.5	(7.4	%)		$	94.0	$	98.7	(4.8	%)
Wholesale		$	1.0	$	1.1	(9.1	%)		$	1.6	$	1.8	(11.1	%)		$	2.6	$	2.9	(10.3	%)
Economy		$	0.0	$	0.2	(100.0	%)		$	0.0	$	2.2	(100.0	%)		$	0.0	$	2.4	(100.0	%)
Total Energy Sales		$	61.2	$	63.5	(3.6	%)		$	35.4	$	40.5	(12.6	%)		$	96.6	$	104.0	(7.1	%)
Wheeling		$	0.0	$	0.0	0.0	%		$	4.2	$	4.0	5.0	%		$	4.2	$	4.0	5.0	%
Gas Sales		$	0.0	$	0.0	0.0	%		$	0.0	$	3.3	(100.0	%)			0.0		3.3	(100.0	%)
Other		$	1.2	$	1.0	20.0	%		$	0.0	$	0.0	0.0	%		$	1.2	$	1.0	20.0	%
Total Miscellaneous		$	1.2	$	1.0	20.0	%		$	4.2	$	7.3	(42.5	%)		$	5.4	$	8.3	(34.9	%)
Total Revenue		$	62.4	$	64.5	(3.3	%)		$	39.6	$	47.8	(17.2	%)		$	102.0	$	112.3	(9.2	%)

c. Contract Balances

The table below provides information about contract receivables, contract assets and contract liabilities.



	June 30, 2018		December 31, 2017
Contract receivables, included in accounts receivable	$	23,398,897	$	31,215,494
Consumer deposits		3,500,298		3,754,416
Contract asset		1,670,979		4,921,794
Contract liabilities		1,583,712		1,581,481

Contract receivables represent amounts receivable from retail, wholesale, economy, wheeling, and BRU customers. Consumer deposits represent the deposits required of certain customers to receive electric service and are refundable payments not recognized in revenue. When the customer either terminates service or has established a positive payment history, the deposit is either returned to the customer in cash or applied to the customer’s account.

The contract asset consists of the fuel cost under-recovery and represents the under-collection of fuel and purchased power costs through the fuel and purchased power adjustment process, which will be collected from customers in the following quarter.

Contract liabilities consist of credit balances and fuel cost over-recovery. Credit balances represent the prepaid accounts of retail customers and are recognized in revenue as the customer uses electric service. Fuel cost over-recovery represents the over-collection of fuel and purchased power costs through the fuel and purchased power adjustment process, which will be refunded to customers through lower rates in the following quarter.

Significant changes in the contract assets and liabilities balances during the six months ended June 30, 2018, are as follows:



	Contract assets Increase (decrease)		Contract liabilities (Increase) decrease
Revenue recognized that was included in the contract liability balance at the beginning of the period	$	0	$	1,155,677
Revenue recognized and transferred from contract asset at the beginning of the period		(4,921,794)		0
Cash received, excluding amounts recognized as revenue during the period		1,670,979		(1,157,908)
Net change	$	(3,250,815)	$	(2,231)

d. Transaction Price Allocated to Remaining Performance Obligations

The table below includes estimated revenue to be recognized during the remainder of 2018 and in 2019 related to performance obligations that are unsatisfied (or partially unsatisfied) at June 30, 2018.



	2018
Credit balances	$	1,583,712

Credit balances are primarily associated with Chugach’s LevelPay program. The program calculates the monthly amount to be collected from customers annually. It is anticipated the balance will be recognized in revenue within the following year as customers consume electricity.

Chugach’s fuel cost over- and under- recovery are adjusted quarterly, therefore, amounts over or under collected will be collected or refunded in the following quarter.